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    Cigna Group (CI)

    Business Description

    The Cigna Group is a global health company that operates through two main growth platforms: Evernorth Health Services and Cigna Healthcare. The company provides pharmacy benefits, specialty pharmacy, specialty distribution, and care delivery and management solutions through Evernorth Health Services, partnering with various stakeholders such as health plans and healthcare providers . Cigna Healthcare offers comprehensive medical and coordinated solutions, including commercial medical plans and international healthcare solutions, making it a foundational growth business for the company . Additionally, Cigna's business activities include Other Operations, which encompass corporate-owned life insurance and run-off businesses, although these contribute less significantly to overall revenue .

    1. Evernorth Health Services - Focuses on pharmacy benefits, specialty pharmacy, specialty distribution, and care delivery and management solutions, partnering with health plans, employers, governmental organizations, and healthcare providers.
      • Pharmacy Benefit Services - Provides pharmacy benefits management services.
      • Specialty and Care Services - Offers specialty pharmacy and care management solutions.
    2. Cigna Healthcare - Provides comprehensive medical and coordinated solutions through its U.S. Healthcare and International Health operating segments.
      • U.S. Healthcare - Offers commercial medical plans, Medicare Advantage, Medicare Supplement, and individual health insurance plans.
      • International Health - Provides healthcare solutions in international markets.
    3. Other Operations - Includes corporate-owned life insurance and run-off businesses, contributing less significantly to overall revenue.

    Q2 2024 Summary

    Initial Price$362.69April 1, 2024
    Final Price$326.27July 1, 2024
    Price Change$-36.42
    % Change-10.04%

    What went well

    • Cigna's EnCircleRx program for GLP-1 management has gained significant traction, with over 2 million covered lives, reflecting strong client demand for innovative solutions that address high-cost medications  .
    • Express Scripts, Cigna's foundational pharmacy benefit services business, is off to a strong start for 2025, with strong new sales and a retention rate in the mid-90s or better, indicating continued growth and client trust in their offerings  .
    • Cigna is seeing strong growth in their Select segment, with a 7% year-over-year growth in customers within the under-500 employer market, demonstrating their ability to gain market share and meet the needs of smaller employers  .

    What went wrong

    • Increased affordability concerns due to expensive drugs like GLP-1s and gene therapy may pressure margins as clients focus on cost containment. Larger employers are emphasizing affordability, particularly with the wave of drug innovation hitting the market.
    • Changes in Medicare Part D due to the Inflation Reduction Act may lead to significant disruption, potentially impacting Cigna's Evernorth business and Part D plan offerings. The Act is causing PDP premiums to rise meaningfully, creating disruption for seniors and requiring bid adjustments.
    • Elevated medical costs due to increased utilization and inflation in provider contracts may impact Cigna's medical loss ratio (MLR), potentially pressuring margins in the second half of 2024 and beyond. Provider contract inflation is working its way through, and elevated levels of utilization are expected through 2024.

    Q&A Summary

    1. Cost Trends and Guidance
      Q: Are cost trends in line with expectations?
      A: Total cost of care was broadly in line with expectations, with elevated facility-based services and mental health utilization (see ). Surgical cost growth is slowing, but overall trends are sustained yet within guidance. Confident in full-year MCR range outlined (see ).

    2. GLP-1 Growth Opportunities
      Q: What's the outlook for GLP-1 programs and coverage?
      A: We're excited about GLP-1 opportunities. Programs like EnCircleRx help manage weight loss medications (see ). Over 2 million covered lives in EnCircle program (see ). 50% of plan sponsors now cover GLP-1s for weight loss, with utilization growing (see ).

    3. HUMIRA Biosimilars Strategy
      Q: How is the HUMIRA biosimilar strategy affecting results?
      A: We're well-positioned with interchangeable biosimilar HUMIRA through Quallent Pharmaceuticals, now at 20% share after 5 weeks (see ). Adoption is consistent with expectations, improving affordability for clients (see ).

    4. Marketplace Exchange Margins
      Q: How are marketplace margins shaping up for the year?
      A: Individual exchange business performing as expected, with only a small unfavorable risk adjustment true-up (see ). Expect to land slightly below our long-term target margin range of 4% to 6% (see ).

    5. Medical Loss Ratio Outlook
      Q: Why is second-half MLR higher than the first half?
      A: Higher second-half MCR due to pre-pandemic seasonality, normalization of stop-loss utilization, and one extra business day in Q3 (see ). Confident in full-year MCR guidance and pricing to forward-looking cost trends (see ).

    6. Membership Trends
      Q: What are current membership trends?
      A: Exchange membership declined due to strategic pricing actions, but expect strong growth in Select segment with 7% year-over-year growth in under-500 employer customers (see , ).

    7. Part D and IRA Impact
      Q: How does the Inflation Reduction Act affect Part D sponsors?
      A: The IRA will cause PDP premiums to rise, leading to disruption for seniors (see ). We're helping clients navigate changes with proven capabilities in Part D (see ).

    8. Potential Impact of ICRA
      Q: How might ICRA affect the small group market?
      A: View ICRA as a niche market for employers under 50 employees, financially immaterial to us (see ). Our exchange business allows participation if it gains momentum (see ).

    9. Pharmacy Payment Models
      Q: Any updates on pharmacy payment model negotiations?
      A: We offer clients a range of network options and reimbursement types (see ). ClearCareRx provides transparent pricing and is generating interest (see ).

    10. Point Solutions and Acquisitions
      Q: Will you acquire point solutions to integrate offerings?
      A: We've built capabilities organically but remain open to acquisitions (see ). Through Cigna Ventures, we partner with point solutions to innovate (see ).

    11. Guidance Reaffirmation
      Q: Why didn't you raise guidance this quarter?
      A: Despite a strong quarter with some timing benefits, we're reaffirming full-year guidance of at least $28.40 EPS, representing over 13% growth (see ).

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    David BrailerExecutive Vice President and Chief Health OfficerSeptember 2022David Brailer is the Executive Vice President and Chief Health Officer of The Cigna Group. He is also the Founder and Chairman of Health Evolution, a role he began in 2011 .
    David M. CordaniChairman of the Board and Chief Executive OfficerJanuary 2022 (Chairman), December 2009 (CEO)David M. Cordani has been serving as the Chairman of the Board since January 2022 and as the Chief Executive Officer since December 2009. He joined The Cigna Group in 1991 and has held various senior leadership roles .
    Noelle K. EderExecutive Vice President, Global Chief Information OfficerSeptember 2020Noelle K. Eder is responsible for the company's technology and operations function beginning September 2023. She previously served as Executive Vice President, Chief Information and Digital Officer at Hilton .
    Brian C. EvankoExecutive Vice President, Chief Financial Officer, and President and CEO, Cigna HealthcareJanuary 2021 (CFO), February 5, 2024 (CEO, Cigna Healthcare)Brian C. Evanko began his role as Executive Vice President and Chief Financial Officer in January 2021. Effective February 5, 2024, he assumed the additional role of President and CEO of Cigna Healthcare .
    Nicole S. JonesExecutive Vice President, Chief Administrative Officer, and General CounselJune 2011 (General Counsel), September 2023 (CAO)Nicole S. Jones began her role as Executive Vice President and General Counsel in June 2011 and was named Chief Administrative Officer in September 2023. Her responsibilities include Human Resources and legal functions .
    Eric P. PalmerExecutive Vice President, Enterprise Strategy and President and CEO, Evernorth Health ServicesJanuary 2022 (CEO, Evernorth), January 2024 (EVP, Enterprise Strategy)Eric P. Palmer began his role as President and CEO of Evernorth Health Services in January 2022 and assumed the additional role of Executive Vice President, Enterprise Strategy in January 2024 .
    Michael W. TriplettSpecial AdvisorJanuary 2024Michael W. Triplett began serving as a Special Advisor at The Cigna Group in January 2024. He was previously the President of U.S. Commercial at Cigna Healthcare from February 2017 to January 2024 .
    Jamie KatesChief Accounting OfficerJuly 1, 2024Jamie Kates serves as the Chief Accounting Officer at Cigna Group, effective July 1, 2024. Kates is a beneficial owner of 1,216 shares of Cigna's common stock .

    Questions to Ask Management

    1. Given the potential for Skyrizi and Rinvoq to limit the adoption of HUMIRA biosimilars, how does Cigna plan to ensure the success of its biosimilar offerings and mitigate the risk of losing market share in this space?

    2. With the Inflation Reduction Act causing increases in Medicare Part D premiums and potential disruptions, how is Cigna adjusting its strategy to manage these changes, and what impact do you anticipate on your Evernorth and Express Scripts businesses?

    3. As GLP-1 drugs become a major driver of pharmacy benefit trends, how is Cigna addressing the affordability challenges for clients and patients, and how do you foresee this affecting the adoption and effectiveness of your EnCircleRx program?

    4. Considering the current scrutiny and regulatory pressures on pharmacy benefit managers regarding pricing transparency and payment models, how is Cigna evolving its PBM business to address these concerns while maintaining profitability?

    5. Given the anticipated rise of Individual Coverage Health Reimbursement Arrangements (ICRAs) and their potential to disrupt the small group market, what is Cigna's strategy to mitigate any financial impact and capitalize on opportunities within the individual exchange business?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateN/A
    End Date/DurationNo expiration
    Total additional amountN/A
    Remaining authorization$5.6 billion
    DetailsThe program is part of Cigna's capital management strategy to return capital to shareholders, optimize the capital structure, and enhance shareholder value. It can be executed through open market purchases, Rule 10b5-1 trading plans, or privately negotiated transactions, and may be suspended or discontinued at any time.

    Past Guidance

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Earnings Guidance:
        • Full year adjusted EPS of at least $28.40, representing more than 13% year-over-year growth.
        • Full year consolidated adjusted income from operations of at least $8.065 billion.
      2. Segment Earnings:
        • Evernorth: Full year pretax adjusted earnings of at least $7 billion.
        • Cigna Healthcare: Full year pretax adjusted earnings of at least $4.775 billion.
      3. Medical Care Ratio (MCR):
        • Full year MCR within the range of 81.7% to 82.5%.
        • Midpoint implies an 83.1% MCR for the second half of the year.
      4. Capital Management:
        • Expectation of at least $11 billion of cash flow from operations.
      5. Share Repurchases:
        • As of July 31, 2024, repurchased 14.7 million shares of common stock, approximately $5 billion.
      6. Third Quarter Guidance:
        • Third quarter adjusted earnings expected to be approximately 25% of the full year outlook .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Earnings Guidance:
        • Full year adjusted earnings of at least $28.40 per share.
        • Full year consolidated adjusted income from operations to be at least $8.065 billion.
      2. Evernorth:
        • Full year adjusted earnings of at least $7 billion.
      3. Cigna Healthcare:
        • Full year adjusted earnings of at least $4.775 billion.
        • Full year MCR expected to be in the range of 81.7% to 82.5%.
        • Second quarter pretax adjusted earnings expected to be approximately 25% of full year pretax adjusted earnings.
      4. Capital Management:
        • Debt-to-capitalization ratio targeted at approximately 40%.
        • Expectation of at least $11 billion of cash flow from operations.
        • Majority of discretionary cash flow expected to be used for share repurchase.
      5. Shares Outstanding:
        • Full year weighted average shares outstanding expected to be in the range of 282 million to 286 million shares.
      6. Earnings Per Share Cadence:
        • Expected to be approximately 45% in the first half and the remaining 55% in the second half of 2024 .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Earnings Per Share (EPS):
        • Expected to be at least $28.25 per share.
      2. Consolidated Adjusted Revenues:
        • Expected to be at least $235 billion.
      3. Consolidated Adjusted Income from Operations:
        • Expected to be at least $8.025 billion.
      4. Evernorth Adjusted Earnings:
        • Expected to be at least $7 billion.
      5. Cigna Healthcare Adjusted Earnings:
        • Expected to be at least $4.75 billion.
      6. Medical Customers:
        • Expected to have approximately 19.3 million total medical customers at year-end.
      7. Medical Care Ratio (MCR):
        • Expected to be in the range of 81.7% to 82.7%.
      8. Adjusted SG&A Ratio:
        • Projected to be approximately 6.1%.
      9. Consolidated Adjusted Tax Rate:
        • Expected to be in the range of 20.5% to 21%.
      10. Cash Flow from Operations:
        • Expected to deliver at least $11 billion.
      11. Capital Expenditures:
        • Expected to deploy approximately $1.5 billion.
      12. Shareholder Dividends:
        • Expected to deploy approximately $1.6 billion, reflecting a quarterly dividend of $1.40 per share, a 14% increase on a per share basis.
      13. Share Repurchase:
        • Anticipated to repurchase at least $5 billion within the first half of 2024.
      14. Weighted Average Shares Outstanding:
        • Expected to be in the range of 282 million to 286 million shares .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information about the Q3 2024 earnings call for Cigna, so the guidance metrics from that specific earnings call are not available.